Henrico faces $20 million real estate shortfall next year

Henrico County is facing a projected shortfall in real estate tax revenue of more than $20 million next year, but the county's top finance official is optimistic about the future.

Finance Director John A. Vithoulkas said yesterday that he expects a 6.5 percent decrease in county real estate tax revenues for the budget year that begins on July 1. The drop is likely to be steepest for commercial properties. He said up to one-third of the commercial office space in Innsbrook is vacant.

"Going back over 30 years, we have not seen anything like what we are seeing now in the real estate market," Vithoulkas said during a town hall meeting last night at Maybeury Elementary School in western Henrico.

At the same time, however, Vithoulkas said, the county has been buffered from much more severe economic problems because of a sales tax windfall of up to $8 million a year from its decision to change a number of ZIP Code addresses from Richmond to Henrico.

He also said the county protected itself by capping spending during financially flush times.

"Most localities spent up to their revenues, and this locality did not," Vithoulkas said in an interview yesterday. He is upbeat about where the economy is heading.

"We're seeing some positive indicators locally," he said in the interview. "We're starting to see some good news nationally. Not everything is bad news."

The biggest wild card for Henrico and other local governments is how much state revenue they will lose under the budgets that Gov. Timothy M. Kaine will propose in December in his final address to the General Assembly before leaving office. Kaine announced in August that Virginia will cut about $1.5 billion in state spending, most of it in this fiscal year. Kaine will propose a two-year budget for fiscal years 2011 and 2012, as well as revisions to the current state budget.

Some localities, including Chesterfield County, are bracing for the worst. Chesterfield already has projected a $38 million shortfall in the next fiscal year, based on an estimated $20 million decrease in revenues and an additional $18 million in spending.

Henrico officials have been mum about the county's budget outlook until now. State funds represent about one-third of the county's revenues, and real estate taxes represent an additional one-third. The county's commercial real estate sector has been hit especially hard by the recession, with major corporations such as Circuit City Stores, LandAmerica and Qimonda going bankrupt and vacating their offices and operations in Henrico.

Vithoulkas expects an overall decrease in the tax base of more than $20 million, primarily in the budget that takes effect on July 1. The reduced real estate taxes also may affect the current budget, he said. The budget also could change based on changes in the state budget. "At some point, we may well have to revise revenues downward, but I don't see a significant budget revision," he said.

Contact Michael Martz at (804) 649-6964 or .